Calling All Unreasonable Wall Street Professionals

January 19, 2023

I entered Wall Street in 1982 in the Law Department of Smith Barney, Harris Upham & Co.

There is no more Smith Barney.

Nor, if memory still serves me, is there a Bear Stearns, Dean Witter Reynolds, Drexel Burnham Lambert, Kidder Peabody, Lehman Brothers, PaineWebber, Saloman Brothers, Shearson -- they are all gone, sliced and diced into oblivion. In 2023, the winnowing continues, and it is only a matter of time until the FINRA broker-dealer community is reduced to little more than Goldman Sachs, Vanguard, Charles Schwab, Fidelity, Bank of America/Merrill Lynch, J.P. Morgan, Morgan Stanley, and Wells Fargo.

Bigger is not always better, so perhaps with fewer brokerage firms, Wall Street will become more nimble and less bloated. That could be. I don't think so but it's possible. What I see, unfortunately, is the ongoing erosion of independence and professionalism to the detriment of the industry and public investors. Once, stockbrokers did their own research and knew the stocks that they sold. Nowadays, it's up-selling. It's cross-selling. It's cold calling. It's pushing house product and in-house services. Sorry, I'm not going to play the apologist. I will not whitewash the dumbing-down of Wall Street. If anything, it's a history of bad going to worse.

Over the last quarter of a century of Wall Street regulation, the result has been one step forward and two steps back. Always, the SEC is behind the curve and regulating yesterday's fraud. These days, the federal regulator has invested far too much human and financial capital in overly ambitious rulemaking and rule-amending at the expense of robust, aggressive enforcement. FINRA, a self-regulatory-organization, fares no better. No matter the regulator, the effort seems more about the glossy marketing of the appearance of regulation rather than delivering its substance. We get podcasts. We get videos. We get Zoom calls. We get cable TV interviews. We get seminars at over-priced resorts. We get tweets. We get self-serving press releases. We get inundated with moronic reports that were commissioned to examine the obvious. What we don't get is a singular, passionate, laser-focused regulatory agenda designed to proactively ferret out fraud and retroactively prosecute and punish the scamsters and fraudsters.

The public has already voted by opting for self-directed trading rather than reposing trust and confidence in a tarnished brokerage industry. Unfortunately, in making their own investment decisions, many unsophisticated investors fell prey to what they didn't understand: Meme stocks, Crypto, NFTs, SPACs, Day Trading, and the like. No one to trust. Nowhere to go. Frankly, it's a pathetic landscape filled with the walking wounded.

Maybe this year, finally, someone launches a trade group for the industry's hundreds of thousands of professionals. Yeah, I know, wishful thinking. But there are rumblings. I hear them. I feel them. The industry's grunts are getting fed up. They aspire to more than the glorified role of a teleservice operator working out of a soul-crushing call center masquerading as a branch office. The Covid pandemic showed them that they could work from home, work remote. The purported support services provided by the erstwhile wirehouses have been revealed as illusory - and not worth the hit to gross commissions or fees. In 2023, if pressed, many Wall Street professionals would admit that they now realize that they can deliver better customer service if they weren't shackled to a large industry employer by anti-consumer laws and rules enforced by co-opted industry regulators.

What the public investor and the industry both need is an honest, unconflicted financial professional firmly entrenched in the role of a fiduciary. The consequence of that empowerment would be to put meaning into the phrase: You work for me. The "you" being an independent financial fiduciary; and the "me" being the public-investor-client in contradistinction to the industry-employer.

Is it an unreasonable goal? Perhaps, but as George Bernard Shaw opined:

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.

To all you unreasonable Wall Street professionals out there, contact me. Let's make common cause. Let's see if we can make some progress reforming Wall Street!

Securities Industry Commentator:
A legal, regulatory, and compliance feed
curated by veteran Wall Street lawyer Bill Singer
https://www.rrbdlaw.com/6851/securities-industry-commentator/

Calling All Unreasonable Wall Street Professionals (BrokeAndBroker.com Blog)

DOJ RELEASES

Surprise Man Convicted of Numerous Crimes, Including False Claims to the IRS (DOJ Release)

Three Additional Individuals Sentenced for Participating in $10 Million Multi-State Bank Fraud Conspiracy (DOJ Release)

Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting / Bitzlato Ltd. Processed More than $700 Million Dollars’ Worth of Illicit Funds, Including Millions in Ransomware Proceeds / Defendant Wrote on Bitzlato’s Internal Chat Room That its Users Were "Known to be Crooks" (DOJ Release)

Disbarred California Attorney Sentenced To Five And A Half Years In Prison For Long-Running Multi-Million-Dollar Investment Fraud Scheme / Defendant Sold Interests in Real Estate that He Did Not Own (DOJ Release)

El Paso Man Pleads Guilty to Operating Ponzi Scheme Disguised as Crypto Investment Firm (DOJ Release)

Hawaii Couple Charged With Fraud And Money Laundering For Selling Counterfeit Art (DOJ Release)

Texas Man Admits Role in Scamming Seniors in Rhode Island and Elsewhere in Online Romance Scams (DOJ Release)

SEC RELEASES

Nexo Agrees to Pay $45 Million in Penalties and Cease Unregistered Offering of Crypto Asset Lending Product (SEC Release)